Yes. By default, AirPods sense when they're in your ear and receive the audio from your device. AirPods also pause and resume playback when you remove one of your AirPods, or stop playback—and won't resume—when you remove both. When you have Automatic Ear Detection on and you're not wearing your AirPods, audio plays through your device's speakers.
When you turn off Automatic Ear Detection, these features are off and all audio plays to your AirPods whether or not you're wearing them.